The Good And Bad That Investors Should Know About Keppel Corporation Limited’s Latest Earnings Update

Keppel Corporation Limited (SGX: BN4) is a conglomerate with major business segments that include Offshore & Marine, Property, Infrastructure, and Investments.

Last week, it reported its 2018 second quarter earnings update. There are both positive and negative takeaways that investors may want to learn about.

The positives

Firstly, Keppel Corp’s net profit in the second quarter of 2018 grew by an impressive 44% compared to a year ago. The improvement in net profit was driven by stronger performances in the conglomerate’s Property and Infrastructure segments.

Secondly, free cash flow for Keppel Corp improved from S$69.8 million in 2017’s second quarter to S$293.4 million in the reporting quarter. The free cash flow growth can be attributed to the company’s higher profit, and better working capital management.

Thirdly, Keppel Corp’s balance sheet had a net debt position of S$4.87 billion as of 30 June 2018, down from S$5.52 billion at the end of 2017. As a result, the company’s net gearing ratio (net debt over equity) strengthened from 0.46 to 0.40.

Fourthly, the Offshore & Marine segment’s net order book (excluding Sete Brasil-related projects) had increased on both a year-on-year as well as sequential basis. For perspective, the segment’s net order book was S$4.6 billion, S$4.3 billion, and S$3.4 billion, at end-June 2018, end-March 2018, and end-June 2017, respectively. The higher order book indicates that the oil and gas industry’s prospects may be starting to turn around.

The negatives

Firstly, despite the aforementioned growth in the Offshore & Marine segment’s net order book, the business still had a challenging time in the second quarter of 2018 with its net profit falling from a positive S$11 million a year ago to a negative S$17 million.

Secondly, the Investments segment reported a net loss of S$2 million in the reporting quarter, mainly due to its associates making losses as opposed to profits in the previous year.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.